Consulting is a joke
I spent ages in banking and to be fair I have worked with many brilliant management consultants but the whole industry just never made sense to me. Buckle up motherfuckers we're going for a short rant ride:
1. The Bench
This is fucking nuts. In what respectable industry you have a shitton of people sitting on a "bench" and doing jack shit because they are "OuT oF cLiEnT EnGaGeMeNt". I've seen people simply not doing anything for months, getting paid normal salaries, for sitting on a "bench". Consultants will tell you "this is part of the job" but it is just insanely flawed model with bad hiring policies and fucked up project management.
2. The Travel
Being 20-something, I had a Spanish consultant friend, based in Madrid, who was regularly flying "for consulting projects" to New Zealand. Dude was literally on a plane from Auckland to Madrid every three weeks. To my genuine question, why don't they just get someone from New Zealand or least Australia to do this "project", he said - "but I know this industry so well, it makes sense for me to be there".
LMFAO. Are you telling me that no one in the whole fucking continent of Australia knows this specific sector? You need to pull a 25 year old Spanish brother to help you restructure local mines?
The whole concept of consulting overseas travel is borderline insane, consultants will tell you that "people from other countries are cheaper" but this is clearly just an excuse to justify this wild working model.
3. The Work
Nearly all strategy consulting work is just a stamp of approval for higher-ups / governments / C-level suite. That's it. You don't create anything, you don't advise on the matter, you simply tailor your findings to whatever agenda needs to be pushed. It is a fake industry created to justify actions taken by company executives or government officials. You provide CEO ass covering service, nothing more, nothing less.
I'd venture to say that I respect IT consulting or implementation roles more, while not as glamorous, these guys at least push the product and do tangible work (sometimes).
Say what you want about M&A but there is at least some value being created. Modelling or powerpoint might not mean much, but the whole act of M&A creates something new and impactful for employees, customers, and virtually all stakeholders.
Bump, hoping for some good dialogue when the MBB guys get done providing “ass covering advice” for the day
Ok, a few thoughts from someone who spent a handful of years in Consulting:
1) The Bench - Rarely, if ever, are you sitting around twiddling your thumbs for months on the bench. Some firms will fire you if you have been on the bench >3 months. Additionally, most of the time the bench is a meaningful percentage of total employees is when the economy tanks, and Directors and Principals cant sell work. This is the same as Analysts doing more or less nothing in M&A when no one is selling their business, or equity capital markets desks having little to do because no one is looking to IPO. To act like this is some sort of insane and unique scenario is absurd, dont kid yourself. Additionally, you are constantly working on RFPs (equivalent of pitches in IBD), and other internal initiatives, learning new skills (to code, to build strategic frameworks, etc.) and supporting ongoing client work, as available.
2) This one is also obvious, but I guess you missed it. There is limited demand for consultants in New Zealand, so it is far more cost effective to have someone travel for a 2-3 month period from a major metro than it is to build out an entire team in a city or country that has limited interest in consultants. Additionally, it probably made sense for that specific client to have consultants on site, so I am sure that explained why your friend flew to NZ so often. Any consultant will tell you, it is easier to work in person to move quickly. I'd assume your friend worked at a leading strategy firm with tight timelines, as otherwise some of the work more likely than not could have been done remotely. Again, this ultimately comes down to the contract in place, which is dictated by client and firm expectations.
3) You dont create anything? Ok man, I guess bankers dont create anything either then. Frameworks, execution plans, integration plans, all have meaningful impacts on businesses. Similar to how running and facilitating a sell side process creates meaningful value. If consultants don't create anything of value, than why do CEOs like yourself have no problem shelling out millions for our services? If you ask any strategy consultant about the impact of his or her work, they will often be able to tie it back into REAL dollars saved or generated. Surely, surely, if these services weren't so critical, companies like Bain wouldn't be hired by private equity funds left and right to help them identify core growth opportunities, to size markets, and to define and implement cost cutting strategies.
Look man, consulting has many flaws, but these are weak complaints. Going a ways back into my Comments history, I bash the heck out of consulting, so it isn't as though I cant take some constructive criticism. But this just reads like someone who knows very little about the industry, and didn't stop to consider the counter argument for any of the points you raised.
Lastly, I am not trying to protect the honor of the Consulting industry, it was a fine place to work for a number of years, but I found banking to be more enjoyable from a strategic knowledge and skillset development perspective, so please don't come back with the argument that I am obsessed with consulting. Truth is, I didn't particularly like many aspects of the job, but the field deserves a greater level of respect than you are showing it.
If you truly are the CEO of some investment bank, hire a strategy consulting firm to optimize your business and see what value they deliver. I have no doubt that they would shock you with their industry expertise, proposed growth strategy, cost reduction proposal, or in some other meaningful way. Assuming that you hire a credible firm and not just like the strategy arm of TATA.
Based
Who is going to be the one to tell OP that the majority (~75%) of M&A transactions are actually value dilutive and 1) strategics rarely generate the expected returns and 2) PE funds just kick the can down the road with a few meaningless rollups to scale EBITDA from a $ (not margin %) perspective and then sell the business at the same / a marginally higher multiple?
To be so condescending toward consulting as an industry but to talk up banking simultaneously is comical.
WallStreetOasis.com Can we verify this guy's title? He writes like an A1 not a CEO...
I'm running a small M&A shop myself after couple years in banking, so nowhere near typical MD / CEO age but I guess that's the only WSO title that fits. Forgive my brevity and laid-back tone though.
I'm not trying to "talk up banking" and I never said M&A is always accretive - on the contrary, there is tons of bullshit work that goes nowhere and deals are rarely value-generating but the distinct difference vs. consulting is that M&A creates "something". You roll the company up, shareholder structure changes, employees are materially impacted, founders (might) get life-changing liquidity etc. Consulting just gives recommendation. Go with this framework. Try this integration plan. It's all pretty bs buzzword bonanza, it doesn't mean anything, it doesn't have any impact, negative or positive.
All high-finance is bullshit to some extent but consulting is a different level money-grabbing scam game to me.
Yeah man hate it when management fiddles with an integration plan after closing an M&A deal! What a bunch of pathetic buffoons, totally unnecessary. I heard from an EB boutique rainmaker partner (think RBC) that once bankers get their deal toys shipped out the companies they merged just automatically become fucking Siamese twins. Like reverse Ben Carson overnight, crazy shit
Didn’t you say in your first post you “spent ages in banking”…?
Banking can be made fun of even worse than consulting. Making fun of consulting is fine, in and of itself. But if you don't take the same approach to banking... just what are you doing
This you and your meaningful frameworks?
https://tvline.com/news/cnn-plus-shutting-down-streaming-service-folding-1234821828/
You missed the point of 3. Anonymous "CEO in IB" said this in about the most antagonistic way possible, but yeah. The primary reason why most companies hire a top consulting firm to do strategy-type work is generally NOT because they provide some unique insight or genuine value add. It is to cover themselves. A CEO presenting a new strategy that is just a function of internal work is on a lot less firm ground than if the CEO presents that exact same strategy but with the MBB seal of approval.
Everything a top consulting firm can do, any major company can do internally. The incremental value that top consulting firms bring is the CEO CYA services.
This gets less true the smaller and less sophisticated the company is. Your 28-restaurant franchisor with locations across 5 states is probably in a position where such strategic consulting services would actually be useful. Your 100-lawyer law firm that is opening up its second location would likely get an actual benefit from getting such a consultant. Your pre-Ricketts Cubs would likely have received an actual benefit from such consultants. But if the company is Moog, Inc. (aka the less cool Moog of the family) or AES or some company of at least that size, everything such a consultant can do is something the company can handle pretty much as well in house.
The question isn't "can the strategic consultant tie their work to specific results." The question is "what is the value added beyond what could have been handled in house?" For example, if a company is going to say, sell its LDCs no matter what, and they hire an MBB to create a strategy for the company. If the MBB says the company should sell their LDCs, that MBB doesn't get the credit for the incremental value the LDC sale has. That was already something they were going to do.
And on this scale, most strategy engagements for companies of any meaningful size are CEO CYA activities.
I'm seriously hoping CYA doesn't mean what's in my head – please educate me (the acronym)
CEO needs all the company staff generate the same goals, whereas he does not have more time or energy obtaining this. Especially CEOS also do not own the power to persuade vary departments believe him/her.
del
You spent "ages in banking" and have somehow arrived at the conclusion that the majority of M&A transactions are value-generative? Are you actually this retarded or just wildly blissfully ignorant of how many roll-up strategies in the past two decades have fucking fell flat on their faces? Dude doing meaningless work is like 80% of all finance lol get over it.
Seconded
Right? This has to be satire
Some comments:
1) The "bench". Consulting economics is very simple and essentially about managing utilization. Utilzation is a function of two variables, client demand and available staff. Client demand is generally volatile, with particularly strong cycles. Available staff depends on recruiting and promotions. As it is difficult to predict the macroeconomic environment, this brings a challenge in managing recruiting and promotions so that demand and supply are in balance. This results in massive swings to utilization, dropping as low as 30 percent during recessions, meaning there are many consultants on the bench.
The difference to banking is that consultijg firms do not adjust capacity as quickly. It is less common to move around different MBBs for example, and it is also less common to hire at the senior level. Consulting firms still recruit (although at a reduced volume) during bad periods, as they need to maintain a balanced staff pyramid. Also, as it takes significant investment to train a new consultant and firms typically promote from within, firms are reluctant to do mass layoffs, although it happens.
As a consequence, periods of bad utilization are tolerated. The impact is low partner compensation, but margins in general are high enough that ~50 percent utilization can be tolerated without turning a loss.
2) Spanish consultants traveling to new Zealand. Can happen, but would be extremely uncommon, so this must be a very isolated example. Travel costs used to be generally not such that a significant part of overall fees that it would really matter, but clients have become more stingy, even for MBBs.
3) Consulting as ceo cya service. Yes, that's a part of the value proposition. A quite minor part from my perspective, and in any case - so what?
Wasn’t there recently a lot of “sitting on the bench” in areas of IB such as M&A? Pretty sure any sort of deal making industry would have this happen occasionally. I doubt it happens that often in consulting, it’s just that they maybe use that terminology more often to describe slow work - as opposed to slow work in IB.
Slow work in IB is working on shit pitches until 4am…
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